Does anybody know what is a defined benefit annuity?

Question

Best answer go to those who are specific?

Answer 1

It is most likely a savings account of another name. Usually the income isn't taxed until it is withdrawn.

Answer 2

A defined benefit annuity I believe is a type of annuity that will pay out a certain benefit. It can be either a set amount of years or a set amount of payout. For example the annuity may payout 600/month for the next ten years, after that the annuity will be considered paid. If by chance the annuitant dies within the 10 years the annuity should be paid to the beneficiary for the remainder of time.

I may be wrong, but it is an educated guess. I am a former financial consultant who used to sell only fixed annuities.

Good Luck

Answer 3

Contributions
CalSTRS will automatically establish an account under the DBS Program for all DB Program members who perform creditable service and make contributions to CalSTRS on creditable compensation earned for that service.

Each member of the DB Program will continue to contribute eight percent of their CalSTRS-covered salary toward retirement. However, 1/4 of those contributions (two percent of salary) will be allocated to a DBS Program account established for the member and the remaining 3/4 of the contributions on creditable compensation earned by the member will go to the DB Program. The partial allocation of contributions to the DBS Program will not affect any benefits available under the DB Program to the member or to those persons already receiving benefits.

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Vesting
A member’s right to an amount equal to the member’s Defined Benefit Supplement account balance will be vested at the time contributions are initially credited to the member's account.

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Guaranteed Interest Rate
The DBS Program has a guaranteed interest rate which is determined annually by the Teachers' Retirement Board (TRB). The rate is based on the average of thirty-year U.S. Treasury notes for the 12 months immediately preceding the plan year (May - April). For 2006-07, the guaranteed interest rate is 4.75 percent.


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Plan Investments
The DBS Program is a separate benefit structure within the state Teachers' Retirement Plan. DBS Program contributions are invested at the direction of the Teachers' Reirement Board (TRB) in internally pooled portfolios of the Teacher's Retirement Fund (TRF). The DBS Program has ownership of units of these pooled portfolios, which reflect market fluctuations of underlying securities on a daily basis. Units are purchased using the current market value per unit. Unitized funds are accounted for on a multiple class level, which entails the sharing of one portfolio by two or more owners. Income and portfolio level expenses are distributed to each class level on a pro rata basis determined by the amount of units owned as a percentage of the total units of the portfolio.

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Gain and Loss Reserve
Funds accumulate in Gain and Loss Reserve to credit interest to members' accounts during years when the rate of return on investments is less than the guaranteed interest rate. Annual additions to the Reserve are determined by the TRB on earnings in excess of those needed to credit the guaranteed interest rate and pay administrative costs. The Gain and Loss Reserve will also be used to ensure adequate funds are available in the Annuitant Reserve for monthly annuity payments.

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Additional Earnings Credit
The board may declare an additional earnings credit to be applied to Defined Benefit Supplement accounts for a plan year. Prior to declaring an additional earnings credit, the board shall consider all of the following:

(1) Whether the plan’s investment earnings with respect to the Defined Benefit Supplement Program for the plan year exceed the amount required to meet the liabilities identified in paragraphs (2), (3), and (4).

(2) The amount required for the plan year to credit interest on members’ nominal accounts at the minimum interest rate.

(3) The amount of the plan’s administrative expenses with respect to the Defined Benefit Supplement Program for the plan year.

(4) The sufficiency of the Gain and Loss Reserve and whether any additions must be made to that reserve.

For any plan year that the board declares an additional earnings credit, the board shall specify the amount to be added to members’ accounts as a percentage increase. The additional earnings credit shall be applied to the balance of credits in each member’s nominal account as of the last day of the plan year and shall be applied as of the date specified by the board. The additional earnings credit shall not be added to the balance of credits transferred from a member’s Defined Benefit Supplement account to the Annuitant Reserve.

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Additional Annuity Credit
When the board declares an additional earnings credit for a plan year, the board also may declare by plan amendment an additional annuity credit, for members and annuity beneficiaries who are receiving an annuity, based on the remaining balance of creditsin the member's Defined Benefit Supplement account.. The additional annuity credit, if declared by the board, will be paid in a lump-sum.

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Early Withdrawals
Both federal and California state tax codes provide for tax penalties for certain early withdrawals. A 10 percent federal and two percent state tax penalty may be assessed for early withdrawals.

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Retirement Eligibility
A member who meets the following eligibility requirements will receive a retirement benefit under the Defined Benefit Supplement Program:

(1) The member has terminated all employment to perform creditable service subject to coverage by the plan. The member’s employer, or employers if the member has multiple employers, shall certify on a form prescribed by the system that the member’s employment has been terminated.

(2) The member has retired for service under the Defined Benefit Program.

(3) A member has submitted a completed application for a retirement benefit on a form prescribed by the system.

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Retirement Benefit
A member’s retirement benefit under the Defined Benefit Supplement Program will be an amount equal to the balance of credits in the member’s Defined Benefit Supplement account on the date the retirement benefit becomes payable.

A retirement benefit will be a lump-sum payment, or an annuity payable in monthly installments, or a combination of both a lump-sum payment and an annuity, as elected by the member on the application for a retirement benefit.

A member may elect to receive the retirement benefit as an annuity provided the balance of credits in the member’s DBS account on the date the benefit becomes payable equals at least $3,500 after any lump-sum payments have been made from the account.

A member who is retiring prior to January 1, 2007 may choose one of the following five annuities:

a single life annuity without a cash refund feature,
a single life annuity with a cash refund feature,
a 100 percent joint and survivor annuity,
a 50 percent joint and survivor annuity, or
a period certain annuity payable over a specified number of years from a minimum of three years to a maximum of 10 years.
A member who is retiring on or after January 1, 2007 may choose one of the following five annuities:

DBS Member-Only Annuity (formerly known as a Single Life Annuity With a Cash Refund),
DBS 100 percent Beneficiary Annuity (formerly known as DBS 100 percent Joint and Survivor Annuity),
DBS 75 percent Beneficiary Annuity,
DBS 50 percent Beneficiary Annuity (formerly known as DBS 50 percent Joint and Survivor Annuity), or
a period certain annuity payable over a specified number of years from a minimum of three years to a maximum of 10 years.
Upon distribution of the entire retirement benefit in a lump-sum payment, no other benefit will be payable to the member or the member's beneficiary under the Defined Benefit Supplement Program.

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Reinstatement from Retirement
If a member reinstates from service retirement, payment of a retirement annuity will terminate. The member’s Defined Benefit Supplement account will be credited with the actuarial equivalent of the member’s annuity as of the date the annuity is terminated.

If the member subsequently retires again, an annuity based on the remaining balance of credits in the member’s Defined Benefit Supplement account at the time of the subsequent retirement will become payable.

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Disability Eligibility
A member who meets the following eligibility requirements will receive a disability benefit under the Defined Benefit Supplement Program:

(1) The member has terminated all employment to perform creditable service subject to coverage by the plan. The member’s employer, or employers if the member has multiple employers, shall certify on a form prescribed by the system that the member’s employment has been terminated.

(2) The member has been approved to receive a disability allowance or a disability retirement allowance under the Defined Benefit Program.

(3) The member, or the member's employer or conservator on behalf of the member, has submitted a completed application for a disability benefit on a form prescribed by the system.

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Disability Benefit
The member’s disability benefit under the Defined Benefit Supplement Program shall be an amount equal to the balance of credits in the member’s Defined Benefit Supplement account on the date the disability benefit becomes payable.

A disability benefit will be a lump-sum payment, or an annuity payable in monthly installments, or a combination of both a lump-sum payment and an annuity, as elected by the member on the application for a disability benefit.

A member may elect to receive the disability benefit as an annuity provided the balance of credits in the member’s DBS account on the date the benefit becomes payable equals at least $3,500 after any lump-sum payments have been made from the account.

A member may choose one of the following five annuities:

a single life annuity without a cash refund feature,
a single life annuity with a cash refund feature,
a 100 percent joint and survivor annuity,
a 50 percent joint and survivor annuity, or
a period certain annuity payable over a specified number of years from a minimum of three years to a maximum of 10 years.
Upon distribution of the entire disability benefit in a lump-sum payment, no other benefit will be payable to the member or the member’s beneficiary under the Defined Benefit Supplement Program.

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Reinstatement from Disability
If a member’s disability allowance or disability retirement allowance is terminated, payment of a disability annuity will terminate. The member’s Defined Benefit Supplement account shall be credited with the actuarial equivalent of the member’s annuity as of the date the annuity is terminated.

If a disability allowance or a service or disability retirement allowance subsequently becomes payable again, an annuity based on the remaining balance of credits in the member’s Defined Benefit Supplement account at the time of the subsequent disability or service or disability retirement becomes payable.

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Final Benefit
A final benefit under the Defined Benefit Supplement Program will become payable when the system receives proof of the member’s death.

If the member’s death occurs before an annuity under the Defined Benefit Supplement Program becomes payable, the final benefit will be an amount equal to the balance of credits in the member’s Defined Benefit Supplement account on the date of the member’s death.

Upon distribution of a final benefit in a lump-sum payment, no other benefit will be payable under the Defined Benefit Supplement Program to the member's beneficiary.

Final Benefit Payable as an Annuity
A beneficiary, other than an entity, may elect to receive the final benefit as an annuity provided the balance of credits in the member’s Defined Benefit Supplement account equals at least $3,500. The beneficiary who elects to receive an annuity will elect one of the following forms of payment:

a single life annuity without a cash refund feature,
or a period certain annuity payable over a specified number of years from a minimum of three years to a maximum of 10 years, but not to exceed the life
expectancy of the beneficiary.
The beneficiary may designate a payee to receive the remaining balance of payments if the beneficiary’s death occurs prior to the end of the period certain.

Death of Member Receiving an Annuity
If the death of a member occurs while the member is receiving an annuity under the Defined Benefit Supplement Program, the final benefit will be payable in accordance with the terms of the annuity elected by the member.

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Termination Benefit (Refunds)
The termination benefit is a lump-sum payment that is equal to the balance of credits in the member's Defined Benefit Supplement account. Upon termination of all employment to perform creditable service subject to coverage under the plan for a reason other than retirement, disability, or death, a member will be eligible for a termination benefit. To qualify for a termination benefit, a member must not have been paid a termination benefit in the last five years.

Upon distribution of the termination benefit, no further benefit will be payable to the member or the member’s beneficiary under the Defined Benefit Supplement Program.

Mandatory Disbursement
If a member submits an application for a refund of contributions under the Defined Benefit Program, that application will also be deemed an application for a termination benefit under the Defined Benefit Supplement Program.

Waiting Period
A termination benefit is payable after six months have elapsed following the date the member terminated employment. If the member performs creditable service within the six months following termination of employment, the termination benefit will not be payable and the application will be cancelled.

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DBS Program Information Definitions

Additional Earnings Credit
A percentage determined by the TRB for a plan year by means of a plan amendment and credited to members' DBS accounts on a specified date.
Annuitant Reserve
Reserve account established by the TRB within the CalSTRS' Cash Balance Fund for the payment of monthly annuities.
Beneficiary
Any person(s) or entity designated by the participant or otherwise entitled by law to receive the death benefit under the plan.
Creditable Service
Specific activities performed for an employer in a position requiring a credential, certificate, or permit, or under the appropriate minimum standards adopted by the Board of Governors of the California Community Colleges, or under the provisions of an approved charter for the operation of a charter school for which the employer is eligible to receive state apportionment.
Defined Benefit (DB) Program
California State Teachers' Retirement System Defined Benefit Program as set forth in Part 13 (commencing with Section 22000) of the Education Code.
Disability Benefit
Benefit for permanent and total disability, that is an amount equal to the balance of credits in the member's account as of the disability date.
Disability Date
Date the benefit becomes payable to a member who has been approved for a disability benefit from the DBS Program.
Employee Account
The nominal account to which 2 percent of the member's 8 percent are diverted along with accrued interest and any additional earnings credits credited under the plan.
Employee Contribution Rate
Percentage of the member's salary withheld by the employer as an employee contribution.
Employer
School district, community college district, or county office of education that has elected to provide the benefits of the DBS Program to persons employed to perform creditable service. Employer does not include the state.
Final Benefit
Benefit payable under the plan upon the death of the member.
Full Time Equivalent (FTE)
The time that a person who is employed on a part-time basis would be required to serve in a school year if he or she were employed full time, as defined by Education Code Section 22138.5, in that position.
Member
Person who has performed creditable service subject to coverage under the DB Plan, and who has contributions credited under the DBS Program or is receiving an annuity under the DBS Program by reason of creditable service.
Plan
The State Teachers' Retirement Plan.
Plan Year
Period commencing on July 1 and ending on June 30 in the following year.
Reinstatement
Reemployment with an employer in which creditable service subject to coverage by the DBS Program had previously been terminated and a lump-sum distribution or annuity had been paid.
Retirement Benefit
Retirement benefit payable is an amount equal to the balance of credits in the member's acount as of the retirement date.
Retirement Date
Date the benefit becomes payable to a participant who has applied for a retirement benefit from the DBS Program.
Salary
Remuneration in cash for creditable service by an employer to a participant. Salary does not include fringe benefits, job-related expenses, money paid for unused accumulated leave, compensatory damages, severance pay, annuity contracts, tax-deferred retirement programs, or other insurance programs.
Termination Benefit
Benefit that is an amount equal to the balance of credits in the member's account payable under the provisions of the DBS Program six months after termination of all creditable service.
Total and Permanent Disability
Any medically determinable physical or mental incapacity that is expected to prevent the participant from performing creditable service for the employer for a continuous period of at least one year.

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